Earnings Report /
Saudi Arabia

Al Othaim: Q2 22 earnings call summary

  • Total revenue increased by 3.8% yoy to SAR2.25bn in Q2 22, mainly driven by new stores opening.

  • Registered loyalty customers under IKTISSAB program increased to c1.0mn, up 5.2% ytd.

  • Total grocery market is expected to increase from SAR165bn (currently) to SAR190bn in 2026f (CAGR of c3%).

SNB Capital
5 September 2022
Published bySNB Capital

Financial performance

  • Total revenue increased by 3.8% yoy (-8.4% qoq) to SAR2.25bn in Q2 22, mainly driven by new stores opening. The decline on the sequential basis was due to Ramadan rolling back to Q1 vs Q2 last year.

  • Gross profits increased by 14.3% yoy (-6.3% qoq) to SAR458mn, while gross margins expanded to 20.1% in Q2 22 vs 19.2% in Q2 21. They were marginally lower than 20.3% recorded in Q1 22. The yoy increase in gross margins was due to lower promotional activity compared to last year. The management highlighted that promotional item accounted for c55% of total sales mix vs historical average of 60-65%.

  • In absolute terms, operating expenses increased by 16.5% yoy (+141.8% qoq) to SAR890mn, primarily due to higher S&D and G&A expenses. The company attributed the increase in the S&D expenses (+14.5% yoy) to new store opening, while G&A expense increased by +36.8% yoy due to increasing competencies in senior positons.

  • Income from associates stood at SAR5.92mn in Q2 21 vs a loss of SAR1.17mn in the same period last year, as the company recorded its share of the profit of the Gulf Flour Milling Company for the second quarter (was not there in the corresponding period last year).

  • The management stated that the milling company recorded a profit of SAR17mn in H1 22. However, the management highlighted that there is seasonality in the business and H2 22 performance may not be similar to H1 22 performance.

  • Other income declined to SAR2.3mn in Q2 22 vs SAR5.47mn in Q2 21 as the company stopped recognizing income from the real estate investment company. AlOthaim market sold its stake (representing 13.6% of total capital) to Al-Othaim Holding Company in July 2022.

  • Net profits decreased by 2.7% yoy to SAR46.6mn in Q2 22 vs 47.9mn in Q2 21.

Operational performance:

  • During Q2 22, the company opened 9 new stores (all in Saudi) and overall have opened 18 new stores in H1 22 while closed 2 stores. On a net basis, the company opened 16 stores during H1 22, taking the total store count to 332 (288 Saudi and 44 in Egypt).

  • During H1 22, LFL sales growth was 5.81% and average basket size for retail decreased by 3.5% yoy. Total transactions increased by 15.2% yoy.

  • Registered loyalty customers under IKTISSAB program increased to c1.0mn, up 5.2% ytd.

Outlook

  • Total grocery market is expected to increase from SAR165bn (currently) to SAR190bn in 2026f (CAGR of c3%).

  •   Over the medium term, the company plans to open 20-30 stores per year.

  • AlOthaim’s management is targeting to increase its market share from c8% to 10% by 2026f.

  • No more equity injection in milling company.